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Tri State Advanced Surgery Center, LLC v. Health Choice, LLC

United States District Court, Eastern District of Arkansas, Jonesboro Division

April 16, 2015

TRI STATE ADVANCED SURGERY CENTER, LLC, GLENN A. CROSBY II, M.D., F.A.C.S., and MICHAEL HOOD, M.D. PLAINTIFFS
v.
HEALTH CHOICE, LLC and CIGNA HEALTHCARE OF TENNESSEE, INC. DEFENDANTS CONNECTICUT GENERAL LIFE INSURANCE COMPANY, CIGNA HEALTH AND LIFE INSURANCE COMPANY, AND CIGNA HEALTHCAR E OF TENNESSEE, INC. COUNTERCLAIM-PLAINTIFFS
v.
SURGICAL CENTER DEVELOPMENT, INC D/B/A SURGCENTER DEVELOPMENT and TRI STATE ADVANCED SURGERY CENTER, LLC COUNTERCLAIM-DEFENDANTS

ORDER

James M. Moody Jr. United States District Judge

Plaintiffs Tri State Advanced Surgery Center, LLC (“Tri State”), Glenn A. Crosby II, M.D. (“Crosby”), and Michael Hood, M.D. (“Hood”) bring this action against Health Choice, LLC (“Health Choice”) and Cigna Healthcare of Tennessee, Inc. (“Cigna”) alleging anti-trust violations of the Sherman Act, 15 U.S.C. §1; tortious interference with contract; intentional interference with business relationships; and violations of the Tennessee Consumer Protection Act. In addition, Cigna and two additional parties, Connecticut General Life Insurance Company and Cigna Health and Life Insurance Company, have filed what they title counterclaims against Tri State and an additional party, Surgical Center Development, Inc., d/b/a SurgCenter Development (“SurgCenter”). Both Defendants have filed motions to dismiss all of the claims against them for failure to state a claim pursuant to Rule 12(b)(6). Tri State and SurgCenter have also filed a motion to dismiss the counterclaims. This order only addresses Defendants’ motions to dismiss. Jurisdiction is proper in this Court on the basis of the claims brought under the Sherman Act and the Court’s supplemental jurisdiction over Plaintiffs’ state law claims. 28 U.S.C. §1331 and 28 U.S.C. §1367.

Rule 8(a)(2) requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” In reviewing the sufficiency of a plaintiff’s allegations when challenged with a motion to dismiss, the court must determine whether the complaint states a claim for relief that is “plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678. The court must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in favor of the nonmoving party. Cole v. Homier Distributing Co., Inc. 599 F.3d 856, 861 (8th Cir. 2010).

Factual Allegations

This is a concerted refusal to deal case brought by two doctors and an ambulatory surgery center against a physician-hospital organization and an insurer. Plaintiffs allege that Defendants attempted to run Tri State out of business by preventing Tri State from contracting with insurers in the Memphis metropolitan area and by preventing referrals to Tri State.

The facts, as drawn from the complaint, are as follows. Plaintiff Tri State is an ambulatory surgery center (ASC) located in Crittenden County, Arkansas. It treats patients from Arkansas, Mississippi, and Tennessee. Plaintiff Crosby is a neurosurgeon who practices medicine with the Crosby Clinic in Memphis, Tennessee and at Tri State. Plaintiff Hood is a surgeon specializing in sports medicine and general orthopaedics who practices medicine with Delta Orthopaedics & Sports Medicine in West Memphis, Arkansas and at Tri State. Defendant Cigna acted as either the third-party administrator of various employers’ healthcare plans or as an insurer of various healthcare insurance policies. Defendant Health Choice is a joint venture physician-hospital organization (PHO) between MetroCare Physicians, an independent physician association (IPA) and Methodist LeBonheur Healthcare (“Methodist”), “the dominant hospital system in the Memphis metropolitan area.” Health Choice contracts with health insurers, like Cigna, to provide networks of medical providers and provides managed care contracting services for medical providers. Both Crosby and Hood are members of MetroCare.

Pursuant to an agreement, Health Choice and Cigna mutually decide which Health Choice doctors should be included in Cigna’s provider network. Tri State does not have a participating provider agreement with Cigna and is thus considered out-of-network for Cigna’s members.

In letters dated June 27, 2013, Cigna notified physicians who treated patients at Tri State, including Crosby and Hood, that they had been “engaging in a pattern and practice of consistent and repeated referrals of Cigna patients to [Tri State], which is a non-network facility that does not participate with Cigna.” The letter demanded that the physicians attest that they would “refer Cigna patients to in-network facilities” or Cigna would evaluate whether the physicians’ continued participation with Cigna “is in our mutual benefit.” Plaintiff alleges that Cigna and Health Choice illegally agreed that Cigna would send the letters “in order to coerce the physicians into directing the vast majority of these patients to Methodist-affiliated facilities and away from Tri State.”

On October 2, 2013, Cigna sent a letter to Health Choice’s CEO, Mitch Graves, that it was terminating Crosby and Hood, among others, from its network effective December 1, 2013. The letter stated that Cigna was invoking the without-cause termination provision, but Crosby and Hood allege that they were terminated for refusing to sign the attestation. Plaintiffs further allege that a Cigna representative advised Hood’s office manager on November 4, 2013, that Health Choice had sent a letter to Cigna requesting that Cigna terminate Hood from its network and that Cigna agreed to do so. Crosby was also advised that Health Choice and Cigna had agreed to terminate him from Cigna’s network unless he attested that he would only refer patients to in-network facilities.

The complaint further alleges that in July of 2013, another doctor was given notice by Cigna that if he did not stop referring patients to Tri State, he and his partners would not be permitted to perform a new office procedure, balloon sinuplasty, even though Cigna had permitted other doctors to perform this procedure in their offices. This same doctor received a letter from Cigna demanding that he disclose his financial interest in Tri State to his patients, though he had a financial interest in other ASCs and had never had to disclose his interest in those. These actions by Cigna were part of Health Choice and Cigna’s “anti-competitive effort to dry up referrals to Tri State and to stymie any competition from Tri State.”

Plaintiffs make further separate allegations against Health Choice. The complaint states that Health Choice committed other illegal conduct by making agreements with non-party insurers Aetna and Blue Cross Blue Shield of Tennessee in which these insurers agreed to advise doctors that they could not refer patients to Tri State in a “further effort to dry up referrals to Tri State and to stymie competition from the facility.” Also, Plaintiffs state that at a Health Choice board meeting, Tri State was denied membership in Health Choice even though it had not yet submitted an application to join.

Sherman Act Claims

Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.” 15 U.S.C. §1. The Supreme Court has explained that the prohibition is not to be taken literally, and that only “unreasonable restraints” are prohibited. State Oil Co. v. Khan, 522 U.S. 3, 10 (1997). There are two ways to evaluate whether an agreement violates Section 1: using the so-called “rule of reason” analysis or making the determination that the agreement is a per se violation.[1] Under the rule of reason, the “ true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.” Chicago Board of Trade v. United States, 246 U.S. 231, 238 (1918). “Rule-of-reason analysis guides the inquiry unless the challenged action falls into the category of ‘agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.’” Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284, 289 (1985) (quoting Northern Pacific R. Co. v. United States, 356 U.S. 1, 5 (1958) (internal citations omitted).

The per se rule is limited to agreements that are so inherently anticompetitive as to be illegal per se, such as horizontal agreements among direct competitors. NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998). The Supreme Court has acknowledged that there is some confusion surrounding the application of the per se rule against group boycotts such that “[s]ome care is therefore necessary in defining the category of concerted refusals to deal that mandate per se condemnation.” Id. at 294. Furthermore, the Supreme Court has expressed its reluctance to extend per se analysis “to restraints imposed in the context of business ...


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